innovation playground Idris Mootee

Service Strategy - What Is The New Gold Standard? Michelli Has Some Of The Answers. Lessons From Ritz-Carlton.

I don’t remember when the word “service economy” first showing up five or ten years back. What is “service economy”? In economic terms, services are a diverse group of economic activities that include high technology, knowledge-intensive sub-sectors, as well as labor-intensive, low skill areas. In many ways, the service sectors exhibit marked differences from products (manufacturing), these distinctions are blurring.

Technology is shaping the economics of service.  It is also affecting the relationship between product producers and consumers in areas previously unthinkable from fast moving consumer goods to health care, where the need for personal contact to diagnose and treat ailments is becoming less essential.  One distinguishing feature of services is the relatively high emphasis placed on intellectual capital, or “intangibles”, in many service activities.  These “intangibles” are not often captured in financial market valuations although that is changing slowly. 

Service is particularly important in the top end of the hospitality industry and the luxury good sector. I have widely spoken on topic of luxury goods marketing in Spain, London and Italy over the last few years, but my focus was on the brand and retail experience design, not on the service side.  There’s always the question of what does luxury really mean? I’ve been tackling this quandary for many years as part of our work on the ultra-luxury brands.

I have identified the following recurring themes in delivery of ultra luxury brands: firstly, at a minimum, for consumers to feel the unsatisfiable desire; secondly, for them to enjoy a standard or experience that is beyond ‘their expectations or imagination’; and thirdly, to feel individual, very special and your product and services need to enhance their individuality. And contrary to popular belief, exclusivity is not the primary determinant of a luxury brand although it is the case in emerging markets. Exclusivity, in and of itself, does not increase the desirability of luxury goods with today’s democratically minded luxury shopper. Luxury has new manifestations particularly in consumer electronics and technology sector. Today luxury brand need to have certain performance too. Nice packaging and fancy ads won't cut it.

Back to the topic of service, my friend Joseph A Mitchelli is an authority in customer service and organizational consultant. I just received a copy of his latest book ‘The New Gold Standard: 5 Leadership Principles for Creating a Legendary Customer Experience’. It is a follow up to his bestseller on Starbucks. The new book focuses on how Ritz-Carlton has elevated the luxury experience to an art form. The book contains a lot of field-tested advice from both senior and front-line managers at Ritz-Carlton.  Here’s a except from one of my favorite chapters ‘Attention is a Multisensory Activity’:

• Staff must empathize with the guest’s emotional perspective by utilizing all of their senses
• Staff must be encourage to put themselves in the situation of others
• Staff must look for opportunities to serve others, even when you are not in direct interaction with those needing service
• Anticipating guests’ needs is a simple, almost artistic skill-one in which you listen and observe the guests’ habits

Here are some good questions from the book to take home:

• In what ways have you designed service delivery that appeals to both the thinking and feeling aspect of the consumer?
• How does staff gain an awareness of the opportunities they have to wow or make emotional connections with customers at every touch point of the customer interaction?
• What processes and technologies do you employ to maximize cross-departmental service?

Four Cool Innovative Start-Ups That Have Great Potentials

A few people asked what are the cool innovations out there. Despite the current economic climate, there are still a lot of innovation companies launching new services. i can think of four. May have a few more.

First one is Babbel, it is an Internet application for playful language learning. Their intuitive lessons allow people to connect and interact. It's intuitive interface, audio cues and user-generated visuals allow people to virtually travel around the world and learn different languages. They include German, English, French, Italian and Spanish for now. Babbel also features game-like multimedia “trainers,” exercise applications lasting 2-5 minutes. Each lesson package contains material pertaining to a different theme, such as travel or business, so you can learn a series of words and phrases within context. I think this is very smart idea.

The second one is CalliFlower, it is an Ottawa-based company called Iotum that develops applications for free conference call service integrated into a web app. It is more than just conference call, they have spent years working on a revolutionary approach to teleconferencing. Call it Voice 2.0.  It allows the callers to see pictures of all of the attendees to the call, and see their status (muted, hand up etc) and there is also a "live wall" feature; a back-channel that allows a shared IM chat to go on between attendees at the same time as the call. I am sure they are working on many more new features. They have a Facebook app and you can manage all your calls there. Once you've tried it , there's no reason to go back to conventional conference call. They are onto something.

The third one is called SocialThing. The Colorado-based received $300,000 in early-stage funding from eonBusiness, as part of a $500,000 convertible note round. It is still in an early private beta, and is looking to launch in the 3-4 months. What it does is offer a centralized place to manage your digital life, moving a bit beyond traditional profile aggregators. You can take your profile anywhere and manage your online identity. I think we can all find that useful. Let me count how many online profiles I currently have...

The fourth one is a video-indexing and search platform Viewdle, it is based on a facial-recognition technology. It allows users to search for videos, going straight to the part of a video where a specific face appears, or where that person talks about a specific topic (hence, the tech includes voice/text recognition). It is a pretty cool idea. The system works in two stages: when a person's image is run through the system for the first time, Viewdle's development team has to identify that person (either using metadata -- accompanying text, tags, captions, etc -- or probably manually); from the second time on, the system recognizes the person with a 90% accuracy, by comparing the new picture with the one that's been identified and tagged in the system. I can see the use of this technology for other applications.

BullShits Are Like Cholesterol: Do You Know What's Bad and What's Good?

Design thinking and applied creativity is a mystique for many. We often come across a lot of bullshits because many simply want to push their own ideas and desperate to throw in all kinds of irrelevant thoughts and associations. Or sometimes designers use language that others do not understand and so labeled them as bullshits. Is it easy to tell when a design discussions becoming just bullshits or they are genuine design dialogue? Not all designers can communicate and sometime those who can articulate design cannot design. This is a post for another day.

Harry Frankfurt, a Professor of Philosophy at Princeton wrote in his book one of the most salient features of our culture is that there is so much bullshit. We watch, listen to and read all kinds of bullshits everyday. There is no question some of us contribute our share. Many (like me) are very confident of our ability to recognize bullshit and to avoid being taken in by it. Frankfurt, a popular moral philosopher, attempts to build such a theory. With his characteristic combination of philosophical acuity, psychological insight, and humor, Frankfurt explores how bullshit and the related concept of humbug are distinct from lying. The book is worth reading. He argues that bullshitters misrepresent themselves to their audience not as liars do, that is, by deliberately making false claims about what is true. In fact, bullshit need not be untrue at all. Bullshitters seek to convey a certain impression of themselves without being concerned about whether anything at all is true. They quietly change the rules governing their end of the conversation so that claims about truth and falsity are irrelevant.

Frankfurt concludes that although bullshit can take many innocent forms, excessive indulgence in it can eventually undermine the practitioner's capacity to tell the truth in a way that lying does not. Liars at least acknowledge that it matters what is true. By virtue of this, Frankfurt writes, bullshit is a greater enemy of the truth than lies are. Bullshiters don’t know whether they are right or wrong. Essentially any pitch has some bullshit elements in there, or the process is an exercise of bullshits. In design, the pursuit often include some functional design objectives, answer to user needs or aiming at a number of user personas. The emotive elements are usually harder to describe. It comes from a deep belief and intuition that simply cannot be right or wrong. Is this bullshit?

Le Corbusier (Charles-Édouard Jeanneret-Gris, who preferred to be known as Le Corbusier 1887 -1965), was a Swiss-born architect, designer, urbanist, writer and also painter, who is famous for his contributions to what now is called Modern architecture. Early in his career, he was influenced by the problems he saw in the industrial city. He thought that industrial buildings and housing techniques led to crowding, dirtiness, and a lack of a moral landscape. It is certainly true today, but when he was advocating the ideas he wasn’t certain. He was simply an advocate of his ideas. Would that make him a bullshitter? Later he transformed his ideas to physical form, as houses which he created as “a machine for living in”. (I am a big fan of his work and I have half-a-dozen of his original pieces at home)

Bullshit is in fact part of the design process, we should not see in a negative fashion. It is simply a process to rationalize ideas and concepts or the unrationalizable. Sometimes these rationale are anchored upon observational insight which again has not quantitative grounding, but that doesn’t mean they are not scientific. It is rather hard to describe the inquiry as it a very personal journey for a designer to immerse oneself to look for signals, particularly those signals that are hard to pick up. So it is fair to say that every great inventor/innovator/designer/architect needs to be a bullshitter.

Sometimes I use the world “bullshit” within two completely different contexts. When we can say we need to put more thoughts around an idea and build a story around an innoavtive concept, we say “add some bullshit around it”, but we are not demeaning the process or intend to misrepresent the idea at all. Quite the contrary, we mean we need to put more thoughts on the rationale.  We do understand the need to articulate the rationale on any innovative ideas. Sometimes we back up with some hard facts.

And sometimes I say “that stuff is full of bullshit” and that's when we refer to someone who has no idea of what he or she is talking about. That’s different from a designer expressing this design rationale. In this case, we are referring to people who has no subject matter knowledge, lack of a valid opinions or has no idea of what problem he or she is trying to solve. They are not misrepresenting or lying; just have no credibility, insight to anchor upon. I am using a different definition that Frankfurt. This is a very different kind of bullshits. And I am very good in recognize bullshit and never hesitate to dismiss them. I actually make that process quite painful for them. Ask anyone who have worked with me.

Innovation Doesn't Need Best Practices. It Needs Weird Practices!

 
I have been approached by many like-minded people from all lover world saying how much they like our proposition. Today innovation is no question the hottest topic but executives are generally disappointed in their ability to make innovation work or making tangible outputs or results. Even trying to infuse an organization with innovation is often far more frustrating than many can imagine.

There are no best practices in innovation. There are no best organization design or structure for innovation. There are no knowledge management systems or collaboration tools to make innovation less risky. There are simply no straight paths to innovation. Corporate cultures are one important driver of innovation and same as outside partners.

Our innovation experience convinces us that a disciplined focus on three fundamentals may produce the building blocks of more effective innovation. A first step is to formally integrate innovation into the executive planning agenda. In this way, innovation can be not only encouraged but also tracked, and measured as a core element in a company’s growth aspirations. Second, executives can make better use of external talent for innovation, people who bring proven tools and multi-disciplinary thinking. Bring them in as your innovation partner and have a formal innovation program that span across different business units and geographies.

Finally, identify leaders to help foster an innovation culture based on creativity and trust. In such a culture, people understand that their ideas are valued, trust that it is safe to express those ideas, and oversee risk collectively, together with their managers. Give them space to experiment.

Innovation remains one of the most poorly undertaken functions within the modern Fortune 500. Serious doubts continue about the innovative capacities of the large, diversified firms. Blame it on bureaucracy or organizational form. These challenges have long been recognized and researched by academics. Excessive hierarchies, lengthy decision-making, and resource allocation process are just some of the all-too-common features typically and frequently cited as being found in these organizations.

What Is A Manager? Who Needs A Manager? The Word "People Manager" Sucks.

There’s so much myth about management. This word today has less and less meaning. Just like business administration, I have an MBA but ever see myself as an business administrator or manager. It is a pretty silly name. When people try too hard to be a manager and that’s where problem begins. You can manage a project or process, you cannot manager people, unless you’re running a production environment. When people bring their brains to work, how do you manage it?

When you build a high performance culture, no one needs to manage anyone. You pick not only smart people but also people that have a passion for success, strong analytic mind and/or creative self expression somewhere deep inside them. They are not managers and not aspire to be one. They are good coaches and leaders. They want to be part of something big, bigger than an individual, meaningful, to make a contribution, and to find fulfillment in what they do. You can only inspire, coach and support them, there’s nothing to manage. If you’re telling me you are actively managing your top people, then you these yearnings are often managed out of people in the unrelenting quest for predictable mediocrity or satisfactorily underperformance.

People are seldom encouraged to be themselves, have fun, or seek fulfillment in their jobs. Instead, they are pushed to just do their jobs, and not bringing their true capability to the organization. How often you heard companies say their employees are their most important, this has always been the biggest bullshits. This is the root cause of the overmanaged and underinnovate problem. For 25 years, I made the choice and had the opportunity to be associated with only the best and the brightest. The minute I see deadweight, I get rid of them.

How often you see that company are saying how much value employees and then seeing how quickly they get rid of theme when earnings fall short, but at the same time offering big bonus to CEOs for successful restructuring. Most ridiculous examples are some CEOs even enjoy big benefits if they die. They call this golden coffins.

 
Let's try to understand how it works. Companies pay incentives because they want to retain their CEOs and the senior management team. If they die, there’s no one to retain and why are they paying these big sums? Help me to see the logic behind it.

One company in Texas (I won’t name but it is not one of my clients) would have owed $4.4 mil in salary for its deceased executive.  Also his death would aslo trigger a $158,400 payment listed as “car allowance”. Not sure what car you drive when you're dead.

Some more examples here:

- Comcast is committed to paying the salary of its CEO for 5 more years after his death, along with five years of bonus, really not sure how to justify that. It was values at $60mil.

- Shaw Group is committed to pay $17.4 mil after the death of their CEO as non-compete payment after death. Again not sure how a deceased person can come back and compete.

- Occidental Petroleum’s contract with its CEO called for his salary to be paid until his 99th year birthday, dead or alive. He died at 92 in 1990.

Our Latest Trend Forecast: Widget Culture, Crowd Madness, Eco-Maniac, Privacy frantic and Nearly Free.

A very busy Sunday night trying to get ahead before week starts. I have been getting lots of calls and emails from organizations that want to discuss equity partnership with Idea Couture last few weeks. They range from agency holding companies to big tech players. Will continue with these dialogue and in the meantime work out our 2 year plan. Just reviewing our latest trend forecast for the next 18 months and I thought I would share some of them with you here.

Widget Culture: I don’t know how many new widgets are being produced daily, expect this to continue and expand into mobile. The life span of these widgets will be shorter but adoption will be much faster. It is like fashion. We will be flooded with branded widgets. Including strange one that allows us to figure out what causes sudden jumps in searches for some of the strangest topics and/or people.

Crowd Madness: We will see crowd-based business model pops up everywhere. Although many are not exactly feasible or scalable, expect to see a few big winners. This is the most powerful trend that most companies underestimate its impact and implications.

Eco-Maniac: We will get so tired of these messages and claims. Eco-message will become so uncool as consumer can see through the talk and want the walk. There will be Eco-maniac communities that monitor what companies do or what they say they will do.

Privacy Frantic: Digital intrusion is becoming a big issue as we make our way through everyday life, data is collected from each of us, frequently without our consent and often without our realization including surveillance cameras, location-based system and social graphs. It doesn’t take much to put the pieces together. The other problem is when our intimate information is removed from its original context and revealed to the publics, we are vulnerable to being misjudged on the basis of our most embarrassing, and therefore most memorable, tastes and preference.

 

Nearly Free: I am not referring narrowly to free content.  There is a big disconnect between people who are in the business of content, the law and digital culture. We see studio moguls, recording executives all seeking to impose what Lessig calls an 'extremist' agenda by divorcing copyright law from its moorings in the Constitution as a balanced copyright bargain struck between creators and the public. Instead, we're now seeing a new brand of intellectual property, where digital 'property' rights are valued above all else and "piracy" is portrayed as the common enemy. Outside of this, many things can still be free? According to Chris Anderson, “Today it's digital technologies, not electricity, that have become too cheap to meter. It took decades to shake off the assumption that computing was supposed to be rationed for the few, and we're only now starting to liberate bandwidth and storage from the same poverty of imagination. But a generation raised on the free Web is coming of age, and they will find entirely new ways to embrace waste, transforming the world in the process. Because free is what you want — and free, increasingly, is what you're going to get.”  I don’t think that will the case. There is now such a thing as a free lunch as I often tell my kids. We can expect a free version for everything but once you are seriously about using it, you will pay. It is nearly free only,

This Is Month 10 Of Our Company, Things Are Moving Faster And Fatser. If Things Look Too Smooth That Means We Are Not Moving Fast Enough.

Here’s a picture of one of our teams in action (L2R, director of usability and information design Jeff, director of strategy Edwin, head of technical development Souvik and head of new business Nick). Very Hugo Boss looking, which doesn’t happen every day. I think we will be running out of space soon. Every month we’re adding new people (5 this month), Each one of them is carefully picked and must be ir has potential to be the best in their respective discipline. It is the only way to build a great company. That way, I will never have to worry about mediocrity because the system will reject it. Our policy is to maintain ‘deadweight free’ so we can move fast and smart. I hope we can continue to remain agile when if we reach 100 people. The office is getting a lot of good energy lately, just good 'chi' everywhere.

One of our current projects requires us to look at semantics search. It is a very important area and for us is how that would change social media. Semantics search is hot but many are confused of what it is. It is basically a smarter search that allows a system to discern if there is a link between two words, such as money and happiness. We all know that the relationships between the two are complex and both direct and indirect, and can be categorized as such. Our brain seems to comprehend this easily (may not be so in this example), but for a computer it is a very difficult to understand it. We are all trying to solve this puzzle.

So how does semantics search allow technology to refine its search capability? It can automatically place pages into dynamic categories, or tag them without human intervention. Knowing what topic a page relates to is key for returning relevant content. It can offer related topics and keywords to help you narrow your search. Instead of offering you all the related keywords, it directly incorporates them back into the search with less weight than the user inputted ones. I am sceptical whether this will produce better results or just more different ones. If the engine uses statistical analysis to retrieve it’s semantic matches to a keyword then it’s likely that keywords currently associated with hot news topics will bring those in as well.

A semantic search engine generally takes the sense of a word as a factor in its ranking algorithm or offers the user a choice as to the sense of a word or phrase. (This is not the same as what is known as Semantic Web which requires a lot of more human labor to tag everything) Can technology tells what is the content of a text? Or to be more precise: what are the core concepts which must be identified in order to grasp the essential meaning of a text? Or what is its emotion or tone? Or its credibility whether it is an opinion or results of research? The challenge is to locate this central core of the text that holds the essentials of its meaning. This is step one before any attempt at interpretation. Generally only a very small proportion of these text - constitute the foundations of the concepts, if they were removed, the "textual construction" would collapse totally, and the meaning would be lost.

Content analysis consist of the following four steps:
1/ the identity of the main actors,
2/ the relations they have to each other,
3/ the hierarchy of these relations,
4/ the tone and style of the words.

Microsoft is moving fast on this and is rumored to buying Silicon Valley semantic search engine Powerset.
The purchase price is rumored to over $100 million although no announcement has been made. Powerset has developed a technology that trys to understand the full meanings of phrases you type in while searching, and it returns results based on that understanding.
 Microsoft’s strategy is to close the gap with Google’s search engine. Google was quick to dismiss Powerset’s semantic, or “natural language” approach as being only marginally interesting. Behind the scene Google has hired a team of semantic specialists to work on that approach. This is the next race for search and I think the winner will not be Microsoft or Google.

Google’s search results are still based primarily on the individual words you type into its search bar, and its approach does very little to understand the possible meaning created by joining two or more words together. Powerset’s technology is still controversial because, while sexy in theory, the natural language approach is difficult to pull off in practice. Many wonder if the technology can ever be developed enough to be useful within a major search engine. Powerset was valued at a $42.5 mm after the first round of financing just two years ago. Investors expected that the technology it acquired from PARC would help this into a killer app. However, the technology has taken longer to develop than expected. Powerset has a high burn rate, and so a purchase at $100 million is considered a safe result for an area that is also seeing increasing competition (players such as Hakia, Twine and TextDigger are all using similar approaches). I need to dig deeper into Hakia and TextDigger in the coming months and will share my thoughts here.

Are You Trained To Tell Good Stories? Do You Understand The Power Of Narrative in Business?

We know all children love stories. Here's J.K. Rowling, unarguably the master story teller of this century. When my kids were young they have always loved stories. When my oldest, was 10, I told stories to him every night before he went to sleep. I made up all kind s of crossover stories which I turned super heroes into 6 year olds. Their favorite ones were about how Batman struggles with math in school and he imagined he could do extraordinary things. He decided to put on this Bat suit band protected his classmates from bully. They found that story funny. My younger son have continued their brother's love of story and at 14, he is asking for stories from his older brother.

American psychologist Jerome Bruner, author of the influential essay "The Narrative Construction of Reality, has documented that children, as early as two years old, show that "they understand the stories that their families tell them, and they start to tell their own stories, and in particular start to tell stories to themselves as part of their first efforts to make sense of their lives." This supports the notion that all of us are hard-wired to tell stories, somehow not everyone know how to use that skill.

When I was working with Michael Coyle in a very exciting strategy project (he was my client as Chief Strategy Officer of Intrawest), I see him as a great story teller. He told wonderful stories of travel experiences and how those inspire people and change their lives. He truly understands the power and art of storytelling both  external to customers and internal to investors and board of directors.

What is it about stories and storytelling that seems to resonate with many of us? I’ve seen many bad presentations that bring out slides after slides of facts that hasn’t for a story behind it. What is a bad presentation? One that doesn’t tell a story or the story is not personal, authentic or inspiring.
Businesses tell stories all the time, for customers, for investors, for staff. Designers tell stories all the time. Musician’s job is to tell stories. Let's take a look at the kinds of stories businesses that are being told every day.

There are brand stories (the stories what a brand truly stands for), marketing (the stories of how customers love to our offerings), and promotion (the stories of what a good deal this is). We also use stories for investor relations, recruitment and for mergers and acquisition. Businesses tell stories about their past and their futures.  Stories are how we remember; we tend to forget power points and bullet points. Business people not only have to understand their companies' past, but then they must be prepared to tell stories of the future. And how do you imagine the future?  Part of Idea Couture’s innovation process is storytelling. As stories, we create scenarios of possible future and as groups we try to anticipate the threats and opportunities. It is very effective way to talking about the future and potential disruptions.

Storytelling was probably developed in archaic times as a means to organize vast and confusing amounts of information. It retains that function and becomes particularly important in transitional times such as the present. Cross media storytelling is becoming a core skills for marketers. As traditional markers of identity such as ethnicity and class become elusive, individuals, and companies as well, need to articulate their stories in order to define themselves.  Storytelling, arguably the most traditional of arts, in the context of a culture dominated by emerging media,is the mostt important skills people and institutions need to learn, leveraging the power of narrative. 

Do you have your story ready?

Passion, Commitment and Intuition - Three Must Haves For Start-ups

 
This week is a no travel week so I am using the time to catch up with my VC friends to see what they are up to. I was talking to Rick Segal (JLA Ventures) today about the state of investments in the current market. On the topic of finding/funding the right people, we both agreed that while it is easy to transfer the intellectual capital of a start-up idea to a new hire, it is extremely difficult to transfer the emotional capital so the person with the expecation that he or she will run the start-up with the same level of passion and commitment. 

Passion, commitment often comes with intuition. In the crazy world of never-ending unknowns, human-intuition can prove to be very useful as a reliable alternative to painstaking fact gathering and analysis, because there are not facts. Great start-up manager often rely on their instincts than on facts and figures in running their businesses.

Let me explain why. The best story comes from classic of military strategy (as a business strategist for 20 years, I can tell you all stories from Carl to Mao). The word “strategy” entered the English language in around 1810, when Napoleon’s success as a battlefield general made him emperor of Europe.  His enemies started studying how he did it so they could learn it too and defeat him.  Clausewitz’s account of Napoleon’s strategy matches amazingly well what modern neuroscience tells us about flashes of insight. For those who have no idea of who Clausewitz (1780–1831) . He was a Prussian general and military strategist hevilily influenced by the Napoleonic wars in which he fought. 

Clausewitz had a four steps approach. First, you take in “examples from history” throughout your life and put them on the shelves of your brain.  Study can help, by putting more there.  Second comes “presence of mind,” where you free your brain of all preconceptions about what problem you’re solving and what solution might work. Third comes the flash of insight itself.  Clausewitz called it coup d’oeil (which is French for “glance”). In a flash, a new combination of examples from history fly off the shelves of your brain and connect in that split second.  Fourth comes “resolution,” or determination, where you not only say to yourself “I know what? I have an idea"!

The most difficult one is the third step “presence of mind”, when you need a sense of what’s the best strategic option, you will need to put away your analytical mind for a few seconds, clear your mind from false paths and let your intuition go to work. At best, an intuitive leap can create a breakthrough. "When you're entering an area where the unknowns are high, and experience is important, if you don't rely on intuition you're cutting yourself short," according to Howard Gardner (a professor of cognition and education at Harvard). 

According to Einstein, "There are no logical path to these laws. Only intuition resting on sympathetic understanding of experience can reach them."

Should You Build Your Business Strategy Like Doing 'Tai Chi' - It's Non-linear, Adaptive and Is All Judo-Economics

 
Strategic planning today is seldom strategic. Many companies label their operations meeting as strategic planning. 90% of the times they use a top-down formal process of articulating a vision and translate that to actions, assuming the word “freeze” while they execute. This sense of disappointment was captured in a McKinsey research based on 800 senior executives: just 45% of the respondents said they were satisfied with the strategic-planning process. Moreover, only 23% indicated that major strategic decisions were made within its confines. Given these results, managers might well be tempted to jettison the planning process altogether. These are all smart people, so what is the problem with planning?

Think about a chess game, no one plans for than 5 moves. I cannot imagine one can plan 50 moves until victory without knowing how the other player acts. In the crazy world of business, it is a chess game with more than 2 players and the rules are changing as they play, imagine how dangerous it is to have a strategy that cannot reacts or keep pace with changing environment, responding timely to competitive actions and changing direction and at the same time empowering people throughout the company to make the relevant informed decisions. I have been a strategy consultant for 25 years; I have seen these mistakes happening all the time.

Here’s some insights from ‘Tai Chi’ which technically be translated as the 'Supreme Ultimate Force'. The notion of 'supreme ultimate' is often associated with the Chinese concept of yin-yang, the notion that one can see a dynamic duality (male/female, active/passive, forceful/yielding, etc.) in all things. 'Force' can be thought of here as the means or way of achieving this ying-yang, or 'supreme-ultimate' discipline.

Let’s look at the combat aspects of Tai Chi, which can be applied to business strategy. In Chinese philosophy and medicine there exists the concept of 'chi', a vital force that animates the body. One of the avowed aims of Tai Chi is to foster the circulation of this 'chi' within the body, the belief being that by doing so the health and vitality of the person are enhanced. The way things happen and the behaviors occur are always through on going opposition between different requirements, desire, corporate intent, market demand or values. There are always things to be reconciled. What one has to recognize is that there is an on going process in which these things come together and translate into something that works. Business strategy is a purposeful adaptive system that constantly adjusting to market demand but pushing to a direction. Maintaining that adaptive system is part of getting the 'chi' flowing.

Let’s use the two-person exercise called 'push-hands’, a 'Tai Chi' skill that can be applied in strategy. The concept is to be sensitive to and responsive of your competitor's 'chi' or vital energy. It is also an opportunity to employ some of the martial aspects of Tai Chi in a kind of slow-tempo combat. The emphasis in Tai Chi is on being able to channel potentially destructive energy (in the form of a kick or a punch) away from one in a manner that will dissipate the energy or send it in a direction where it is no longer a danger.

In business strategy context, the ‘chi’ is the deep strategic core of your competitors, their dominant logic or view of the industry that drives that actions and tactics. With that knowledge, you can predict your competitors’ moves and stay ahead of the game. Getting the ‘chi’ also means getting a pulse of emerging trends that can help define potential demand for a company's future products or services and where capacities are being built and when prices will drop etc. Here, disruptions are considered part of system and it is not trying to avoid or ignore them, but to embrace and leverage them. When a strategy is not agile, it causes great firms to fail. The cognitive failures that companies experienced are not normal accidents or mishaps, but a fundamental problem in our planning process.

The ‘push hand’ exercise is like a posture that best positioned against uncertainties whether you’re dealing with the music industry, nano tech or bio tech. Uncertainties offer opportunities, they may offer higher returns and lower risks for companies seeking to shape the market. When your industry is transitional by nature, often emerging after major technological, macroeconomic, or disruptive technologies, 'Tai Chi' concept can be most helpful.  Since no player necessarily knows the best strategy in these environments, the game is to provide a evolving vision of an industry structure and standards that will coordinate the strategies of other players and drive the market toward a more stable and favorable outcome or a standard or platform. You need to move from defense to attack mode back and forth. It is not about simply applying force or market power in this case. 'Tai Chi' is based on the principle of the soft overcoming the hard. In this case, you cannot force everyone into a standard or platform, no matter how dominant you are. Direct opposition of another's force is strictly discouraged (price war is a violation of Tai Chi principle because one one wins), and great emphasis is placed upon borrowing the force of the opponent and using it to one's own advantage. The idea is use an opponent's own strength against him, thereby allowing the weaker and slower to overcome the stronger and faster opponent. Just imagine if your organization can be organized this way?

Look ay Yahoo today, not only the lost their ‘chi’, it is reacting to outside forces and have no control over their destiny. Some 40 to 50 senior executives and engineers have left Yahoo since the beginning of the year - at a pace that appears to have accelerated in the last few weeks. At least five key executives, including Vish Makhijani, senior vice president of Yahoo's search group, and Jeff Weiner, executive vice president of the company's network division, were reported to have resigned this week. Microsoft is making some smart 'Tai Chi" moves, whether they get Yahoo or not does not matter. Even if they don’t get Yahoo, they have done so much damage to Yahoo that drastically reduced their threat to Microsoft…all without spending a penny. That’s a good move. In an effort to highlight its efforts to recruit engineers with Internet search expertise, Microsoft this week placed an ad in the San Jose Mercury News, based next door to Yahoo's hometown of Sunnyvale, Calif. Either I have the company, or I get its brains. I am good with both.

Google Is WPP, Omnicom and Publicis' Nightmare. Google Plans To Replace The Advertising Industry In Its Totality.

I was in London with clients last week and I also had a meeting with my friend at WPP head office (see picture of their modest head office which houses the best financial minds in the business)  We had a great discussion of how they see the ad world’s future. Despite of the challenges that big agencies are having coping with the digital world, they had successfully bring scale and scope to clients. After the meeting, I am asking myself the same old question: Is Google a threat to ad agencies? How real is this threat?

Google and even Microsoft are competing with ad agencies, not in a conventional sense. Google now owns DoubleClick, which makes it a direct competitor to holding companies such as WPP. Today WPP buys estimated $160m of ads space from Google. If Microsoft buys Yahoo, that it becomes a duopoly. Google’s market cap is $160-170bn, WPP’s is $15b and Ominicom is $14.8b, and even including Interpublic ($4b) and Publicis ($6b) we are looking at a total market cap of $43b, only 25% of Google’s. The four agency holding groups have combined revenue of over $33b, 50% bigger than Google. That gives you a sense of what the market is saying about how they see the future of agencies. Google can easily buy two of the largest holding company for $27b and essentially the largest advertising powerhouse that produced and placed 60% of the world’s ad. A fully integrated network that also becomes a monopoly.

The lines are blurring between the buyers and sellers of online media following (WPP's acquisition of 24/7 Real Media) and suggests that agencies may see online as an opportunity to re-enter the media brokerage business. If that’s the case, it would be a full circle for Madison Avenue, whose roots were established when early newspaper advertising reps like NW Ayer & Sons and JWT morphed into full-service agencies, and adopted a commission-based system that derived revenues from a percentage of media billings. That’s the circle of advertising. Not sure many remember that.

WPP last year generated roughly 46% of worldwide revenue from advertising and media with the rest came from marketing services. WPP digital services accounted for nearly 12% of worldwide revenue, still small but I can see this growing to 20% easily. Two months ago they made an unsolicited offer to buy market-research firm Taylor Nelson Sofres for $1.88 billion. The deal was rejected, but if it went through, it would make them the largest agency holding company in the world. WPP is best positioned among all holding companies in this space despite the challenges with traditional advertising with all big shops.

The competitive ground for the agency groups in the next 3 years will be ‘Digital and China’. Period. Those are the two growth pillars. The biggest problem in the industry is in the traditional media and old school ad agencies, there’s a serious talent and capability gap that no way can be filled, no matter how hard they try. Then there’s a big cultural problem as they are organized around creative directors. It is kind of a star culture; it is the opposite of the web. Our culture is not only collaborative and multi-disciplinary in nature. The opportunity is in the digital. Asking old school agencies to do bring digital to the core is like asking a sushi chef to prepare steak tartar, you think there’s no cooking needed for both. it simply won’t work.

Ad agency growth through consolidations became a common strategy for the last 20 years; the question is ‘size’ the competitive advantage and are large networks more productive? Agencies with global reach have the advantage of offering a single point of contact for coordinating marketing activities, improved efficiencies, greater coherence in marketing ‘voice’, and access to global talent pool. The Interpublic Group is the world’s first communication holding company set up to get around the conflict of interest issue. Member agencies could function autonomously and handle competing accounts without compromising client confidentiality. IPG is still struggling hard today. The total number of global ad agencies has been reduced from 8 in 02 to only 6 agencies in 05. I think we will end up having only 4 left in 2-3 years, ignore the tiny ones MDG etc.

The six current players comprise Omnicom and Interpublic, WPP, Publicis and Havas from France, and Dentsu from Japan. As for performance, Omnicom has the highest revenue and second highest revenue growth rate. WPP had the second highest revenues and the third highest revenue growth while Publicis showed the highest revenue growth with relatively modest total revenues. Havas showed both the lowest total sales and revenue growth. This give you a sense of how each agency groups are doing.

Television Broadcast Is Moving To A Multiplicity Model

Are we getting near an industry breakpoint for the broadcast media and television industry?  Macro forces are forcing a collision between the Internet and the world of video and television content distribution.  This transformation may last for a few good years until the industry fully reconfigure itself.

The Internet’s forces of openness, global reach, social nature, consumer participation and control, and long tail economies of scale will change this industry forever. Digital technology has ushered in all-digital linear broadcast networks, with an expanding spectrum that can support hundreds of broadcast channels, and now potentially thousands of video-on-demand offers. It has lower the costs of producing video, and even lowering the costs required to achieve good production values. This in turn has spawned many new production companies and programing efforts, mirroring the growing range of options offered by cable, satellite and telcos. So any one can produce, edit and broadcast.

BBC decided to offer a large part of its television content free of charge on its website. And earlier, ABC announced it would stream some of its primetime shows in HD online for free.  As networks begin to put more and more of their content online — either on their websites or through services like iTunes — both advertisers  and viewers win. But is the future of TV-watching online? Is the big box we’ve grown up which just turned slimmer and slimmer will become obsolete soon?  I don't think so. There are strong signs that people enjoy learning back as well as leaning forward, they are simply different experiences.

What about the unskippable ads?  What is the experience like? Do we feel captive watching them? Or should it be “less skippable” instead.  Let's say Disney continues to sell episodes of Lost and Desperate Housewives through the iTunes, the consumer will be able to choose whether to buy an episode that is ad-free (for $1.99) or watch ad-full. Is that a fair approach? The big concern is cannibalization as people will not need to sit in front of the TV and can simply click search and play.  Or these multiple streams are offering additional revenue opportunities for content owners? Viewers will be segmented by channel choice and many will use multiple platform.  Is this the future of broadcast?

Think about the world of Nike. They sell their shoes through 12 to 15 channels. From Nike Town to Sports Chain to Online Stores to Outlet Stores. This is not a world of one business model. The world is multiple and we will need to work its complexity for our advantage as well as value add for the consumer. The future of TV broadest is a multiplicity model. 

Sony is toying with the idea and will launch its new show "Angel of Death" on the Web, but it is using an approach that it hopes will drive sales of DVDs and boost other distribution avenues down the road. The series will be released online eight minutes at a time, over 10 weeks, on various Sony-affiliated Web sites. After the Internet run, Sony will release a traditional DVD of the series, adding scenes to tie the pieces together in a movie-like way. Expect to see more of this.

Am I Better Off Being An 'Imitvator' Than An 'Innovaor' ?

 

Leaving London and heading home for the weekend. A question that came across a few times this week during my keynote is 'how important it is to be agile'. My response was speed and agility is becoming a major competitive advantage today and it is going to be more so in the next decade. Speed doesn’t necessarily mean being first, you can be choose to be a strategic fast follower and there are plenty of advantages to that. There are two ways to play the innovation game, either you are a true ”innovator” being the first in what you do or you can be an “imitvator”. You innovate while imitate and learn quickly from other people's mistakes.

It is estimated that there were over 50,000 new products introduced into the consumer products sector last year, up 77% from 10 years ago. Since the typical store has only 40,000 SKU’s, it can be pretty difficult for a consumer products company to succeed today! Clearly the world of retail has become ultra-competitive and I’ve been giving keynotes to consumer products companies on how innovation and creativity can create a path out of this madness. Creativity and innovation with retail, financial and consumer products companies involves understanding the reality of the challenge that exists, and innovation strategies that can take your organization forward into the world of hyper-change that is  not slowing down anytime.

There are lots of examples of firms pursuing a "fast follower"  or "imitvator" strategy. You can also look at this as an exploiting other people’s innovation (OPI) strategy. Every one can learn a thing or two from Japanese firms about “imitvator” and, importantly, moving beyond that becoming true innovator. It is almost like a fast track program to play. It applies to both technological-based products to just consumer goods. A range of orthodoxies is making it hard for them to develop breakthrough products as Chinese manufactures are fast to catch-up. Since they have the manufacturing base and vast local market to support any development.

In the past, innovation from CPG mostly in the form of a steady stream of introduction to convenient, high-quality products—ranging from disposable whatever to frozen dinners—that changed the daily lives of consumers. The last 5 years we see product lifecycles were drastically shortened and also seeing poor returns on their investments in product innovation. More new products are being launched everyday, but fewer of them are truly innovative and they end up diluting the market with extensions with unclear customer value propositions.

Their orthodoxies also limit what they can do and these deeply seated mental models shaped by corporate tradition, culture, and values are difficult to unwind. Here are some very common mistakes:

1/ Innovation starts with existing business models and categories and then try to innovate from there. No, you should start not start with business model but instead from customer needs (particularly unserve and unmet needs)

2/ Focus groups and quantitative research are a good way to start to explore trends for innovation. No, those useless data can only tell you so much, start with a deep dive into the everyday’s lives of your customers.

3/ Companies should rely on current team that understand the products market for innovation efforts. No, most executives are not trained to manage innovation, it is not a MBA subject nor some creative brainstorming. You need to have a structure way to play. Go to someone who can bring in a big sandbox. No need to build one.

4/ Companies should come up with as many ideas as possible and "let a thousand flowers bloom." This is usually the problem when a lot of creative people are in the room, everyone will get confused and have no clues of what to do with all these ideas. Ideas generating is only a small part of the innovation process. Innovation is an inherently multidisciplinary, cross-functional activity. Eliminating harmful orthodoxies therefore requires changes across organizations and throughout corporate hierarchies. Clients are looking for help with their approaches to innovation. D-school has been teaching student show to play and that is the best way to enhance any innovation process. Now is time for D-school to play.

How About A D-School And B-School Speed Dating Event?

I was invited to an interesting event hosted by a number of Design school student. They call this a B-School meets D-school mixer event. It was a last minute invite for me and since I am in London I decided to check that out.  The even was organized by Natasha Giezen and friends at the upstairs of the Windsor Castle pub in London Business School. Natasha has an interesting background, she has four degrees (not sure if it is three and she’s working on her fourth) including an MBA from LBS and MA in History and is now working towards her MA at St. Martin’s. She told me a funny story how she was hired as an Accenture Consultant and has no idea of what the job is like. She's a typical corporate misfit..but very creative.

Here’s the original invite for the event:

"Fashion Design - Interactive Teaching - Film, that's some of the fields the designers attending "Designers meet Suits" are into. It's a great opportunity of meeting the people who come up with the creative ideas we are used to dissect. ….Because when d- and b-school students collaborate new breakthrough ideas pop up!”

I think it was a very cool idea. The D-school students were from the MA program at St. Martin College of Design (over the years they produce top talents includes John Galliano, fashion designer and Gilbert and George, 1986 Turner Prize winners) and the B-school people are LBS’ MBAs. They were moving from table to tables to talk about their ideas. It is sort of like speed-dating.

There’s a lot of saying that D-School is the new B-school. Not quite the case in my opinion, I think it is not one of the other, it is both. People like Natasha who operates in the intersection of business and design are the creative (business) class that drives innovation and change in business.

There’s the new German D-school - the Zollverein School of Management and Design. The school is positioning itself squarely in the MBA tradition, even participating in the World MBA Tour, a join international recruiting tour of top MBA schools. There are also special doctoral programs in design science offered with other universities. There’s still questions of companies in Europe will be open to or enthusiastic about or see the need for such an innovative degree. It will be worth tracking how the graduates end up in a few years. That will give us a good leading indicator of what countries, and companies, truly do get it. The whole project of founding a new school started in 1999 as part of a larger program to transform a former coal mining complex in the western part of Germany into a leading international location for design, art and culture.

Innovation in Europe .... Some Random Thoughts

Berlin is now known as the hippest city in Europe according to the people around me. I guess they compare Berlin to New York City in the 1980s due to its cheap rents and prices, ubiquitous graffiti, and outpouring of creativity. They convert a lot of the older buildings on the former East Berlin into clubs. Since the Berlin Wall came down, Berliners have gone through massive reconstruction, mostly in what was formerly East Berlin. The heart of the city, the Mitte district, has been totally rebuilt, though remnants of the communist regime still remain. On the Museuminsel (Museum Island), the glories of Berlin's neoclassical past have been restored, including the Pergamon Museum, which houses reconstructions of structures from Ancient Greece and the Middle East. The 19th-century Reichstag building, which is the new seat of the German parliament, gained a modern glass cupola to replace the original dome destroyed by fire when the Nazis came into power. The area undergoing the greatest change is the Potsdamer Platz, where the largest of its high-density urban developments inaugurated in 1998 added 19 buildings on over 730,000 square feet of land. At the 1998 opening, the Mercedes-Benz marketing headquarters and the Berliner Volksbank in Potsdamer Platz resided alongside hundreds of shops and restaurants. I am happy to be back here this week to present a keynote topic on innovation. What a great crowd from all over the world. Been doing this for a long time and I can’t imagine I keep still having new stories to tell. But it is a hot week, hey it’s only June.

Innovation faces a different challenge particularly in continental Europe The current emphasis on innovation as a source of industrial competitiveness was put in Europe in early 90’s. An Integrated Approach to European Innovation and technology Diffusion Policy’’ in 1993, which stated that ‘’ Innovation and technology policy has an important role to play in developing the competitiveness of industry in the face of global competition and in improving the quality of life. They will face serious challenge when India and China continue to push forward with innovation in the bottom of the pyramid.  Even for highly developed countries in Europe  like Germany and France struggle with real bottle-neck in the research-development-innovation system is the transfer of research results to market exploitation.  There are simply lack of market orientation with how they do it. Innovation is the only way if the EU intends to respond to the economic and social challenges in the next century - the Century for Innovation.

I am staying at the Q Hotel instead of staying with the event organizer. I’m not liking five stars hotel because they look and smell like a hotel. I am boutique hotel fan. This hotel was designed by GRAFT (best known for their work on Brad Pitt's Hollywood Hills studio) and they called this a new super lifestyle hotel, not sure what it means. This 5-star hotel earns a spot on Conde Nast Traveller's roundup of best cool hotels for its inventive and striking design.  Several cab drivers told me Brad and Angelina stay here when they are in Berlin.

There’s lots of innovative thinking in the design of this hotel. First idea, for the first time in a hotel, walls are no longer just the boundaries of a room but actual pieces of furniture. Therefore, guests change their interaction with furniture and architecture and become the actors on the lifestyle stage. It is as if the room has been formed by movement, and it convey energy, tranquillity and inspiration and remind you of futuristic cocoons. Suggest you stay here next time you’re in Berlin. Staff are friendly and it is in a nice area too. The large hotel chains really need to rethink their business. When was the last innovation coming from the big chains? W Hotel I guess, it was a long time ago. Honestly most of these hotel sucks, even if they are 5 stars.

Back to the topic of innovation, I was working on my keynote over lunch. innovation is about doing things differently, doing odd things and doing different things and sometimes crazy things with an intent to change a business, an industry or even the world. Innovation has no best practices and doesn’t need them. It needs aspiration, imagination, new tools and open mind. As a starting point, start thinking different. I used this analogy often in my keynotes, if you are a fish in the ocean, you will be the last one to know what’s water like. It is important to go and get outside help and start to look at your industry to understand where others are focusing their efforts. Industry executives frequently read the same magazine, think the same problem (the idea of an industry is everyone in the same business, solving similar customer problems and often making the same return on capital deployed), and this leads to parallel agendas. Then comes the best practices (tier-four) consultant to help you to benchmark your operations and become even more like everyone. This is a proven formula to mediocrity and a path this is familiar to many.

First thing to start for innovation is to look beyond your industry not only the immediate threats but also for opportunities to borrow ideas emerging in other industries and adaptable to yours. At Idea Couture, we call it “Comparative and Competitive” analysis.

Second thing is to go deep into the lives of your customer and understand their needs, desires and jobs-to-be-done as well the rituals of getting those jobs done. Our anthropologists spend weeks in the life of customers to capture those moments where they need help and often those unarticulated and unmet needs are a great source of innovation ideas. Setting the right climate is another key factor.

You need a structured approach to play and these sessions need to involve outside people beyond the company’s team. Idea Couture’s NoodelPlay uses a mulit-workshop setting with a structures play approach to bring these ideas to life in a story telling fashion. This is where we apply ‘design thinking’ concepts to strategizing. As needs are uncovered and business concepts emerge to address them, the discovery effort shifts to economics of delivery and industry competitive dynamics. To be continue next week.

Social Enterprises - May Be The Best Solutions To Many Of Our Problems

I picked up an old copy of a Harvard Business School Reunion Magazine (1995) from my garage. Flipped through it and an article caught my attention. It was written by Gregory Dees and Kasturi Rangan (HBS professors) reporting about their research in Social Enterprise. The two of them started many years back the school’s initiate of Social Enterprise. They developed field studies and courses in Social Enterprise, which is a second year elective. 

Rangan has always been interested in “social marketing”, which is marketing intended to make socially beneficial changes in the behavior of individual and organizations. I think this is a very interesting idea, if marketers start thinking about their role is beyond selling a product, that’s the starting point of customer engagement marketing. It is particularly interesting to look at that from today's proliferation of social network which can become a powerful platform for social marketing. here is still a lot of work to be done in designing the optimal structure of a social enterprise to achieve a double or triple bottom-line.

More and more private organizations are stepping in solve many of the nation’s social problems. Social Venture is now the coolest thing for high-flying MBAs. I’ve been having  a lot of discussion with people who are interested in Social Ventures. Just the other night I was watching a TV program on social ventures. A great story about two women, Carol Chyau (Taiwan) and Marie So (Hong Kong), who were classmates at Harvard Kennedy School, founded ViD (Venture in Development). They share a passion and perseverance to bring sustainable development to the China.

What’s their big Idea?  Their vision is growing the field of social entrepreneurship in Greater China by identifying, incubating, and implementing ideas that have the potential to become sustainable business enterprises yielding quantifiable direct social benefits.

The economy on the coastal cities of China is booming, serious social ills are exacerbated by widening income inequality, environmental degradation, and loss of social safety net. Social enterprises may be a possible solution; there is very little understanding of the concept. Their mission is to catalyze the creation of more social enterprises in Greater China. It uses its own case studies to generate awareness and coach other aspiring social entrepreneurs. ViD will also implement its own enterprises, such as Shokay and Mei Xiang Cheese Farm, both of which develop high-end products from yaks in Western China to bring to the international market.

Take Mei Xiang Cheese Farm, a sustainable yak cheese industry in the village of Langdu. It is a community of ethnic Tibetan yak herders who live in an isolated fir-lined valley not far from the border with the Tibetan Autonomous Region. Every morning, nomadic yak herders deliver stainless-steel pails of milk to the village's cheese factory, a log cabin equipped with wood-fired burners. Inside the factory, villagers trained by a US dairy expert begin the process of turning the milk, which is higher in fat and protein than cow's milk, into cheese. It takes around five hours to produce each batch. They also produce a harder Italian variety that can be aged and spiced up with other ingredients.